(Muscat, Oman) -- On the back of increased government spending on infrastructure and mega projects, demand for cement is expected to grow at higher pace this year.
In the Oman budget for 2013, RO 600 million has been earmarked for roads and other infrastructure projects. This is in addition to the ongoing projects like Muscat and Salalah airports, Batinah Expressway, Muscat and Salalah expansion.
“The expenditure aims at completing the infrastructure projects such as airports, ports, roads, developing the industrial estates, water and wastewater projects and providing the liquidity necessary for implementing the development projects planned to commence at the year 2013”, according to the Minister Responsible for Financial Affairs, Darwish Ismaeel al Balushi, during the budget presentation.
Oman’s construction sector is on a positive progression with the industry value expected to grow to a level of over $5 billion from under $4 billion in next three to four years at an average growth rate of about 6 per cent.
The growth in construction segment has led to higher off-take of cement, which on the other hand, has helped the sector majors to register double digit growth in their revenues in the second half of 2012.
Oman’s total budget expenditure for financial year 2013 has been estimated at RO 13 billion, which is around 29 per cent higher than the announced budget expenditure for 2012, and around 12 per cent higher than the amended budget expenditure for 2012. Total revenues are estimated to rise 27 per cent to RO 11.2 billion.
It is positive for the economy and market that there has been a 30 per cent increase in allocation to complete the ongoing infrastructure projects. It shows the government’s commitment to create the infrastructure necessary to create an investor friendly environment.
“In the Sultanate, prices are slowly moving up in cement industry, and demand also is on the rise in the region. While these are good news but the supplies in Oman are still under significant pressure making the domestic scenario highly competitive”, according to Ahmed bin Alawi bin Abdulla al Ibrahim, Chairman of the Board of Directors, Raysut Cement.
The local demand for cement is expected to register a CAGR of 5 per cent during 2012-2016.
According to Dr Abdullah Abbas Ahmed, Chairman, Oman Cement Company, “The underlying fundamentals for the Omani cement market continue to remain strong. This has been demonstrated by the positive growth in sales volumes of the first months of the year.”
Till recently, the Omani cement manufacturers were victims of cheap inflow of cement from UAE. In 2011, imports met 25 per cent of cement demand in Oman, mainly from UAE where weak construction sector resulted in excess supply of cement.
The UAE companies recently increased their cement prices.
On the back of construction boom, the UAE cement industry witnessed a significant expansion during the last decade.
However the sector remains over supplied since the onset of global financial crisis in 2008 as the major construction projects in UAE have been shelved.
This in turn had forced the cement manufacturers in UAE to dump the excessive cement at a cheaper price in the neighbouring countries such as Oman.
Cement shares were amongst the best performers in 2012 as Raysut Cement and Oman Cement gained 89.5 per cent and 49.3 per cent respectively.
